Employee performance management is the process companies use to manage their employees to ensure organizational success. Performance management techniques include planning job goals and expectations, monitoring performance, making improvement in the employees' jobs and rewarding good performance. Employees are individuals companies rely on to complete business tasks and functions; employee performance management seeks to improve the company culture and employee goodwill. Improving these areas can help companies hire the best employees and retain valuable employees with key knowledge of business processes.

Companies can spend a lot of time and money hiring and training employees. Using employee performance management systems can be a way to ensure employees decide to stay with the company for several years. Many companies treat employees as valuable business partners, rather than traditional input resources needed to accomplish tasks and goals. Employees may be more willing to work harder to achieve success and recognition under the company’s employee performance management system.

Employee performance management usually contains several steps for guiding and evaluating employees. These steps include planning, monitoring, developing, rating and rewarding. The planning phase starts with companies deciding on the necessary employee jobs and tasks that need to be completed in the workplace. Managers will decide on the specific tasks and wages for each job prior to hiring employees. Once a suitable employee is hired, the employee performance management system moves into the monitoring phase.

The monitoring phase of employee management involves managers training and watching how the employee performs his job. The monitoring phase dovetails with the development phase of the employee performance management system. As managers monitor each employee, they will usually offer tips and advice for completing tasks more effectively and efficiently. These two phases usually make up the bulk of employee management, as they address the actual tasks and job performance of each employee in the company. These two phases are followed by the rating portion of employee management.

The rating phase of the employee performance management system is created by each company according to their management style and company culture. Most companies will explain the rating system to employees while scoring the employee appropriately based on his job performance and productivity. Rating employees is completed on a periodic basis, depending on the company and its employee performance management system.

After an employee is rated for his performance, the company will reward the employee. Rewards can be monetary or incentive based. Common monetary rewards include bonuses, merit pay increases or gift cards; incentive style rewards include banquets with recognition plaques or trophies, extra vacation days or physical gifts of goods or services. Companies may use a mix of rewards on a tiered basis, allowing employees to strive for the best reward available for their job performance.